Part 4: Rebuilding a $1M Ecommerce Business – 6 Month Results
During the summer of 2017 I launched a series on me trying to rebuild a million dollar ecommerce business within one year. After selling my previous company I gave myself a deadline of March 2018 to recreate a new brand with monthly revenue of approximately $80,000.
In this post I'll give a full detail of my revenue numbers so far, my wins, my losses, and my growth plans going into 2018. My hope is that this series can help guide others when starting a new ecommerce brand.
During my last update, I sold over $13,000 worth of products during a 30 day period. I don't reveal my exact brand publicly but my products are essentially 4×4 products (in our paid courses Mike and I are both fully transparent with all of our brands and tactics). During this update I sold just $9,544.20–almost a 30% drop. Overall, I am fairly content with this number as I'll get into here below. Note, these numbers are for up until November 15 and this blog article is not going live until about a month later.
|July 15-August 15, 2017||October 15-November 15, 2017|
Why the Revenue Drop?
The revenue drop was mainly a result of two of my three best sellers being out of stock for nearly the entire period. Had these items been in stock I suspect this revenue number would have been closer to $20,000-30,000. From the beginning of my planning for 2017, I never intended to re-order products earlier than November largely because my items are very much warm-weather dependent and I wanted enough sales history before re-ordering anything.
My bet is that by focusing most my time in the first year developing great products and marketing as well as getting some initial reviews, by the time I re-order all of the products and get them back into stock my revenue well skyrocket come month eleven and twelve (opposed to a slow incline over that time). At this point, I have nearly no products in stock but I have two separate full containers of products and two LCL (Less than Container Load) of shipments to Canada that are set to be shipped in early January.
My projection for sales to skyrocket in March could prove to be way off but I think it's a reasonable expectation when all my new stock arrives.
Snags I Encountered Along the Way
- Trademark rejected and no access to Enhanced Brand Content
- Having to air ship from China due to out of stocks
- Decreased rate of product development
The first snag I hit was having my trademark rejected as it was deemed too descriptive in nature. I always knew it would be a bit of a gamble getting the trademark through but I thought I could get it through after selecting a very narrow category of goods for the trademark. In the middle of 2017 Amazon made trademarks a requirement for brand registry (which is a flawed requirement in my opinion, but that's another article). The good news is that Amazon allowed design marks to be used in September and I've resubmitted my trademark as a design mark which has a higher probability of getting through. The downside is I'm out over $3000 in trademark applications at this point. I also think there is a very good possibility that Amazon will get rid of the trademark requirement altogether by the time my new trademark (hopefully) gets approved. However, I view Enhanced Brand Content as such a competitive advantage that I'm prepared to pay for it even at the risk of it being disapproved again or deemed unnecessary.
I've also had to air ship quite a bit from China due to my products being out of stock. I've never had a problem with a product recovering its rankings after being out of stock for weeks at a time but I don't like my products sitting inactive for months, a prospect I was facing. The good news is I've been working with an FBA prep company in Shenzhen who get very good rates on air courier shipping (about $7/kg) which is close to half the normal rate.
Finally, I faced an overall decreased rate of product development. I originally hoped to have 100 products developed by the Spring of 2018. I revised this number to 50 as it was more reasonable and also very reasonable to do $1 million in revenue with. Currently, as of this writing, I have about 35 products. I attribute this slowed development to a couple of things. First, in the summer I got consumed not only with managing this new brand but also wrapping up some activities from my previous company and other EcomCrew projects (and I got a bit lazy due to the nice weather in Vancouver!). Second, I've been spending a lot of time actually improving products opposed to just private-labeling products. This has taken a lot more development time than I anticipated.
Wins I've Had
Along with the snags I've also had quite a few wins:
- My products sold out quicker than expected
- Higher than expected margins
- Automotive Category referral commission from Amazon less than expected
- Advertising cheaper than expected
The first major win I had was that my two home run products sold out about 2-3x faster than I expected. I now have an entire container of these products on the way to Amazon.com and a partial container en-route to Amazon.ca. I'm excited to have an entire Spring/Summer season of these products that now have a healthy number of reviews. I suspect they could sell $20,000-$40,000 a month, but I won't know until the end of April. I spent a lot of time developing these products. The packaging is excellent on the products, I bundled each with great accessories, made slight improvements to the core product, and the quality of the Amazon listing page for each is miles ahead of the competition.
Second, I had higher than average margins. My gross margins, after all product costs, freight (inbound and outbound), customs, and Amazon fees will be close to 25% and I may be able to inch it up closer to 30%. These are very healthy margins for a product on Amazon in my experience. These margins were helped by the fact that the referral fees in the Automotive Category on Amazon are only 12% opposed to 15%. I never knew Amazon had different referral fees for different categories but apparently they do (cell phone accessory sellers are the real winners–their referral fees are only 8%).
Finally, all of my Amazon advertising campaigns have been far less expensive than I budgeted for–well below 10% ACOS. Sponsored Products have been my meat and potatoes but Product Display ads have also helped steal sales from my competitors.
Growth Plans for 2018
My three year plan for this new brand looks roughly as follows:
- 2017: Focus on developing products, getting sales history and initial traction
- 2018: Focus on revenue growth
- 2019: Focus on profit
I'll be using 2018 to focus on revenue growth for my new brand, which of course, will hopefully hit a $1 million run rate (or around $80,000 a month). I will not be entirely focused on profit, although I still intend to be profitable. I expect there will be a lot of costs spent on design work (packaging, Enhanced Brand Content, videos, photography, etc.) and inefficient logistics. To the latter point, in 2018 I expect to be shipping a fair percentage of products either via air or LCL, often through the use of a 3PL. In 2019, my goal will be to ship everything in a container directly to Amazon which will have large cost savings. I can also look at lowering product costs, largely through volume discounts, especially on packaging. As I mentioned in one of the previous updates, one of the biggest ways to increase profits is by minimizing freight inefficiencies.
Subsequently, most of my growth plans for 2018 are focused on top line revenue growth:
- Develop 15 new products
- Spend $5,000-$10,000 on professional lifestyle photography and video
- Spend $5,000-$10,000 on website/packaging/Enhanced Brand Content rebrand
- Grow a Facebook page to 1000 likes and email list to 1000+ subscribers largely as a platform to launch and sustain Amazon sales
- Have all products at Amazon.ca FBA and consider expanding into the EU (and potentially Australia if it opens up)
- Display at at least one trade show
My goal is still to get to 50 products within 2018 which will mean developing at least 15 new products.
Aside from developing new products, I'll be focusing on strengthening the brand of my current products. I intend to spend a fair amount of money on professional lifestyle photography and videography. This will basically mean paying a photographer to come to some offroad trails with me and shoot some 4×4 photos and videos which I can subsequently use on both a website and Amazon product listing rebrand. The goal is to have the clear-cut best product marketing. Most sellers on Amazon are so focused on winning the price game they ignore the fact that most consumers are willing to pay a premium for a product they have no doubt is high quality. In all of mine and Mike's brands, we aim to be competitive on price but we never play the game of trying to be the absolute lowest price.
If you haven't listened to Mike's Amazon Product Launch Strategy I highly recommend that you do. He focused on using a lot of off Amazon tactics to launch his products and I intend to use a lot these strategies in 2018, specifically growing my email list and Facebook page.
My goal is to have Amazon.ca be at least 25% of my revenue in 2018 simply for the fact there is a lot less competition. This means that I will be shipping all of our products directly from China into Canadian FBA warehouses. In 2017, only about half of my products got listed on Amazon.ca. The freight costs to do this won't be favorable as these shipments will mostly be smaller LCL shipments but the goal by the end of the year is to get these shipments to full container loads so that the math will make more sense. If Amazon Australia ever opens up to sellers, I would also expand there in a heartbeat as Australia is a small market but it is the Mecca of 4x4ing (also, it would make for a great blog article!).
My next update will come in April 2018 when I have the full results of relaunching my brand after a full year.
My feeling is that my March revenue numbers will likely come up short of my $80,000 revenue number largely because I think that I still need a few more products developed by this point. However, if I don't reach that goal by March I suspect I will reach it some time within the first half of 2018 barring any significant snags along the way. I will of course, continue giving updates until I reach that goal.
Do you have any questions about my strategy for rebuilding a $1 million ecommerce brand? If so, feel free to comment below.
He specifically said he had a container going to Canada
I am a beginner of Amazon Seller. I just want to say thank you for sharing all your experience in such detail. This series articles has many useful information and insight of Ecommence.
Glad it helps Oscar!
Automotive & Powersports is a gated category, isn’t it?
Was it easy to get ungated when you are the manufacturer?